7 LONG TITLE
8 General Description:
9 This bill modifies provisions relating to specie legal tender.
10 Highlighted Provisions:
11 This bill:
12 ▸ provides definitions;
13 ▸ authorizes the public treasurer to invest public funds in specie legal tender;
14 ▸ grants the State Money Management Council rulemaking authority to make rules
15 governing quality criteria for a commercial specie repository;
16 ▸ requires the Federal Funds Commission to study certain issues relating to specie
17 legal tender; and
18 ▸ makes technical and conforming changes.
19 Money Appropriated in this Bill:
21 Other Special Clauses:
23 Utah Code Sections Affected:
25 51-7-3, as last amended by Laws of Utah 2013, Chapters 204 and 388
26 51-7-11, as last amended by Laws of Utah 2015, Chapter 171
27 51-7-17, as last amended by Laws of Utah 2015, Chapter 164
28 51-7-18, as last amended by Laws of Utah 2004, Chapter 248
29 63C-14-301, as last amended by Laws of Utah 2015, Chapter 409
31 Be it enacted by the Legislature of the state of Utah:
32 Section 1. Section 51-7-3 is amended to read:
33 51-7-3. Definitions.
34 As used in this chapter:
35 (1) "Agent" means "agent" as defined in Section 61-1-13.
36 (2) "Certified dealer" means:
37 (a) a primary reporting dealer recognized by the Federal Reserve Bank of New York
38 who is certified by the director as having met the applicable criteria of council rule; or
39 (b) a broker dealer who:
40 (i) has and maintains an office and a resident registered principal in the state;
41 (ii) meets the capital requirements established by council rules;
42 (iii) meets the requirements for good standing established by council rule; and
43 (iv) is certified by the director as meeting quality criteria established by council rule.
44 (3) "Certified investment adviser" means a federal covered adviser, as defined in
45 Section 61-1-13, or an investment adviser, as defined in Section 61-1-13, who is certified by
46 the director as having met the applicable criteria of council rule.
47 (4) "Commercial specie repository" means an institution that holds or receives deposits
48 of specie legal tender that is located within the state.
53 regulated financial institution, or a subsidiary of either that is secured by a pool of loans that
54 remain on the balance sheet of the issuer or its subsidiary.
56 Department of Commerce.
58 kind donated to a higher education institution from any source.
59 (b) "Endowment funds" does not mean money used for the general operation of a
60 higher education institution that is received by the higher education institution from:
61 (i) state appropriations;
62 (ii) federal contracts;
63 (iii) federal grants;
64 (iv) private research grants; and
65 (v) tuition and fees collected from students.
67 nationally recognized statistical rating organizations in the highest short-term rating category.
69 whose corpus is intended to be held in perpetuity by formal institutional designation according
70 to the institution's policy for designating those funds.
72 Governmental Accounting Standards Board that is responsible for accounting standards used
73 by public entities.
75 provision applicable at issue to a note or bond, allowing holders to sell their holdings back to
76 the issuer or to an equal or higher-rated third party provider at specific intervals and specific
77 prices determined at the time of issuance.
82 specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated
83 interest rate.
84 (b) "Investment agreement" includes any agreement to supply investments on one or
85 more future dates.
87 district under Title 17B, Limited Purpose Local Government Entities - Local Districts, special
88 service district under Title 17D, Chapter 1, Special Service District Act, or any other political
89 subdivision of the state.
93 Repurchase Agreement approved by the Public Securities Association or by any successor
96 amount of:
97 (a) deposits in excess of the federal deposit insurance limit; and
98 (b) nonqualifying repurchase agreements.
101 (a) that complies with the diversification, quality, and maturity requirements of Rule
102 2a-7 or any successor rule of the Securities and Exchange Commission applicable to money
103 market mutual funds; and
104 (b) that assesses no sales load on the purchase of shares and no contingent deferred
105 sales charge or other similar charges, however designated.
107 organization that has been designated as a nationally recognized statistical rating organization
108 by the Securities and Exchange Commission's Division of Market Regulation.
110 evidencing indebtedness of a qualified depository arising from the transfer of obligations of the
111 United States Treasury or other authorized investments to public treasurers that is:
112 (a) evidenced by a safekeeping receipt issued by the qualified depository;
113 (b) included in the depository's maximum amount of public funds; and
114 (c) valued and maintained at market value plus an appropriate margin collateral
115 requirement based upon the term of the agreement and the type of securities acquired.
117 disbursed for operation of the state government or any of its boards, commissions, institutions,
118 departments, divisions, agencies, or other similar instrumentalities, or any county, city, school
119 district, political subdivision, or other public body.
121 earnings from which are to be used for purposes designated by law.
123 meets quality criteria established by rule of the council.
125 from which the money, funds, and accounts are derived, that are owned, held, or administered
126 by the state or any of its boards, commissions, institutions, departments, divisions, agencies,
127 bureaus, laboratories, or other similar instrumentalities, or any county, city, school district,
128 political subdivision, or other public body.
130 (b) "Public money," as used in Article VII, Sec. 15, Utah Constitution, means the same
131 as "state funds."
133 board, commission, institution, department, division, agency, or other similar instrumentality,
134 or of any county, city, school district, political subdivision, or other public body who has the
135 responsibility for the safekeeping and investment of any public funds.
137 out-of-state depository institution, as those terms are defined in Section 7-1-103, that is
138 authorized to conduct business in this state under Section 7-1-702 or Title 7, Chapter 19,
139 Acquisition of Failing Depository Institutions or Holding Companies, whose deposits are
140 insured by an agency of the federal government and that has been certified by the commissioner
141 of financial institutions as having met the requirements established under this chapter and the
142 rules of the council to be eligible to receive deposits of public funds.
144 evidencing indebtedness of a financial institution or government securities dealer acting as
145 principal arising from the transfer of obligations of the United States Treasury or other
146 authorized investments to public treasurers only if purchased securities are:
147 (a) delivered to the public treasurer's safekeeping agent or custodian as contemplated
148 by Section 7 of the Master Repurchase Agreement; and
149 (b) valued and maintained at market value plus an appropriate margin collateral
150 requirement based upon the term of the agreement and the type of securities acquired.
152 qualified depository and are then redeposited through a deposit account registry service:
153 (a) in one or more FDIC-insured depository institutions in amounts up to the relevant
154 FDIC-insured deposit limit for a depositor in each depository institution; and
155 (b) in exchange for reciprocal FDIC-insured deposits made through the deposit account
156 registry service to the qualified depository.
158 Department of Commerce by Section 13-1-2.
159 (34) "Specie legal tender" means the same as that term is defined in Section
162 (a) public money raised by operation of law for the support and operation of the state
163 government; and
164 (b) all other money, funds, and accounts, regardless of the source from which the
165 money, funds, or accounts are derived, that are owned, held, or administered by the state or any
166 of its boards, commissions, institutions, departments, divisions, agencies, bureaus, laboratories,
167 or other similar instrumentalities.
168 Section 2. Section 51-7-11 is amended to read:
169 51-7-11. Authorized deposits or investments of public funds.
170 (1) (a) Except as provided in Subsections (1)(b) and (1)(c), a public treasurer shall
171 conduct investment transactions through qualified depositories, certified dealers, or directly
172 with issuers of the investment securities.
173 (b) A public treasurer may designate a certified investment adviser to make trades on
174 behalf of the public treasurer.
175 (c) A public treasurer may make a deposit in accordance with Section 53B-7-601 in a
176 foreign depository institution as defined in Section 7-1-103.
177 (2) The remaining term to maturity of the investment may not exceed the period of
178 availability of the funds to be invested.
179 (3) Except as provided in Subsection (4), all public funds shall be deposited or invested
180 in the following assets that meet the criteria of Section 51-7-17:
181 (a) negotiable or nonnegotiable deposits of qualified depositories;
182 (b) qualifying or nonqualifying repurchase agreements and reverse repurchase
183 agreements with qualified depositories using collateral consisting of:
184 (i) Government National Mortgage Association mortgage pools;
185 (ii) Federal Home Loan Mortgage Corporation mortgage pools;
186 (iii) Federal National Mortgage Corporation mortgage pools;
187 (iv) Small Business Administration loan pools;
188 (v) Federal Agriculture Mortgage Corporation pools; or
189 (vi) other investments authorized by this section;
190 (c) qualifying repurchase agreements and reverse repurchase agreements with certified
191 dealers, permitted depositories, or qualified depositories using collateral consisting of:
192 (i) Government National Mortgage Association mortgage pools;
193 (ii) Federal Home Loan Mortgage Corporation mortgage pools;
194 (iii) Federal National Mortgage Corporation mortgage pools;
195 (iv) Small Business Administration loan pools; or
196 (v) other investments authorized by this section;
197 (d) commercial paper that is classified as "first tier" by two nationally recognized
198 statistical rating organizations, which has a remaining term to maturity of:
199 (i) 270 days or fewer for paper issued under 15 U.S.C. Sec. 77c(a)(3); or
200 (ii) 365 days or fewer for paper issued under 15 U.S.C. Sec. 77d(2);
201 (e) bankers' acceptances that:
202 (i) are eligible for discount at a Federal Reserve bank; and
203 (ii) have a remaining term to maturity of 270 days or fewer;
204 (f) fixed rate negotiable deposits issued by a permitted depository that have a
205 remaining term to maturity of 365 days or fewer;
206 (g) obligations of the United States Treasury, including United States Treasury bills,
207 United States Treasury notes, and United States Treasury bonds that, unless the funds invested
208 are pledged or otherwise deposited in an irrevocable trust escrow account, have a remaining
209 term to final maturity of:
210 (i) five years or less; or
211 (ii) if the funds are invested by an institution of higher education as defined in Section
212 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
213 (h) obligations other than mortgage pools and other mortgage derivative products that:
214 (i) are issued by, or fully guaranteed as to principal and interest by, the following
215 agencies or instrumentalities of the United States in which a market is made by a primary
216 reporting government securities dealer, unless the agency or instrumentality has become private
217 and is no longer considered to be a government entity:
218 (A) Federal Farm Credit banks;
219 (B) Federal Home Loan banks;
220 (C) Federal National Mortgage Association;
221 (D) Federal Home Loan Mortgage Corporation;
222 (E) Federal Agriculture Mortgage Corporation; and
223 (F) Tennessee Valley Authority; and
224 (ii) unless the funds invested are pledged or otherwise deposited in an irrevocable trust
225 escrow account, have a remaining term to final maturity of:
226 (A) five years or less; or
227 (B) if the funds are invested by an institution of higher education as defined in Section
228 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
229 (i) fixed rate corporate obligations that:
230 (i) are rated "A" or higher or the equivalent of "A" or higher by two nationally
231 recognized statistical rating organizations;
232 (ii) are senior unsecured or secured obligations of the issuer, excluding covered bonds;
233 (iii) are publicly traded; and
234 (iv) have a remaining term to final maturity of 15 months or less or are subject to a
235 hard put at par value or better, within 365 days;
236 (j) tax anticipation notes and general obligation bonds of the state or a county,
237 incorporated city or town, school district, or other political subdivision of the state, including
238 bonds offered on a when-issued basis without regard to the limitations described in Subsection
239 (7) that, unless the funds invested are pledged or otherwise deposited in an irrevocable trust
240 escrow account, have a remaining term to final maturity of:
241 (i) five years or less; or
242 (ii) if the funds are invested by an institution of higher education as defined in Section
243 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
244 (k) bonds, notes, or other evidence of indebtedness of a county, incorporated city or
245 town, school district, or other political subdivision of the state that are payable from
246 assessments or from revenues or earnings specifically pledged for payment of the principal and
247 interest on these obligations, including bonds offered on a when-issued basis without regard to
248 the limitations described in Subsection (7) that, unless the funds invested are pledged or
249 otherwise deposited in an irrevocable trust escrow account, have a remaining term to final
250 maturity of:
251 (i) five years or less; or
252 (ii) if the funds are invested by an institution of higher education as defined in Section
253 53B-3-102, a city of the first class, or a county of the first class, 10 years or less;
254 (l) shares or certificates in a money market mutual fund;
255 (m) variable rate negotiable deposits that:
256 (i) are issued by a qualified depository or a permitted depository;
257 (ii) are repriced at least semiannually; and
258 (iii) have a remaining term to final maturity not to exceed three years;
259 (n) variable rate securities that:
260 (i) (A) are rated "A" or higher or the equivalent of "A" or higher by two nationally
261 recognized statistical rating organizations;
262 (B) are senior unsecured or secured obligations of the issuer, excluding covered bonds;
263 (C) are publicly traded;
264 (D) are repriced at least semiannually; and
265 (E) have a remaining term to final maturity not to exceed three years or are subject to a
266 hard put at par value or better, within 365 days;
267 (ii) are not mortgages, mortgage-backed securities, mortgage derivative products, or a
268 security making unscheduled periodic principal payments other than optional redemptions;
270 (o) reciprocal deposits made in accordance with Subsection 51-7-17(4)[
271 (p) specie legal tender held in a commercial specie repository.
272 (4) The following public funds are exempt from the requirements of Subsection (3):
273 (a) the Employers' Reinsurance Fund created in Section 34A-2-702;
274 (b) the Uninsured Employers' Fund created in Section 34A-2-704;
275 (c) a local government other post-employment benefits trust fund under Section
276 51-7-12.2; and
277 (d) a nonnegotiable deposit made in accordance with Section 53B-7-601 in a foreign
278 depository institution as defined in Section 7-1-103.
279 (5) If any of the deposits authorized by Subsection (3)(a) are negotiable or
280 nonnegotiable large time deposits issued in amounts of $100,000 or more, the interest shall be
281 calculated on the basis of the actual number of days divided by 360 days.
282 (6) A public treasurer may maintain fully insured deposits in demand accounts in a
283 federally insured nonqualified depository only if a qualified depository is not reasonably
284 convenient to the entity's geographic location.
285 (7) Except as provided under Subsections (3)(j) and (k), the public treasurer shall
286 ensure that all purchases and sales of securities are settled within:
287 (a) 15 days of the trade date for outstanding issues; and
288 (b) 30 days for new issues.
289 Section 3. Section 51-7-17 is amended to read:
290 51-7-17. Criteria for investments.
291 (1) As used in this section:
292 (a) "Affiliate" means, in relation to a provider:
293 (i) an entity controlled, directly or indirectly, by the provider;
294 (ii) an entity that controls, directly or indirectly, the provider; or
295 (iii) an entity directly or indirectly under common control with the provider.
296 (b) "Control" means ownership of a majority of the voting power of the entity or
298 (2) (a) A public treasurer shall consider and meet the following objectives when
299 depositing and investing public funds:
300 (i) safety of principal;
301 (ii) protection of principal during periods of financial market volatility;
302 (iii) need for liquidity;
303 (iv) yield on investments;
304 (v) recognition of the different investment objectives of operating and permanent
305 funds; and
306 (vi) maturity of investments, so that the maturity date of the investment does not
307 exceed the anticipated date of the expenditure of funds.
308 (b) A public treasurer shall invest the proceeds of general obligation bond issues, tax
309 anticipation note issues, and funds pledged or otherwise dedicated to the payment of interest
310 and principal of general obligation bonds and tax anticipation notes issued by the state or a
311 political subdivision of the state in accordance with:
312 (i) Section 51-7-11; or
313 (ii) the terms of the borrowing instrument applicable to those issues and funds, if those
314 terms are more restrictive than Section 51-7-11.
315 (c) A public treasurer shall invest the proceeds of bonds other than general obligation
316 bonds and the proceeds of notes other than tax anticipation notes issued by the state or a
317 political subdivision of the state, and all funds pledged or otherwise dedicated to the payment
318 of interest and principal of those notes and bonds:
319 (i) in accordance with the terms of the borrowing instruments applicable to those bonds
320 or notes; or
321 (ii) if none of those provisions are applicable, in accordance with Section 51-7-11.
322 (d) A public treasurer may invest proceeds of bonds, notes, or other money pledged or
323 otherwise dedicated to the payment of debt service on the bonds or notes in investment
324 agreements if:
325 (i) the investment is permitted by the terms of the borrowing instrument applicable to
326 those bonds or notes or the borrowing instrument authorizes the investment as an investment
327 permitted by the State Money Management Act;
328 (ii) either the provider of the investment agreement or an entity fully, unconditionally,
329 and irrevocably guaranteeing the provider's obligations under the investment agreement has
330 received a rating of:
331 (A) at least "AA-" from S&P or "Aa3" from Moody's for investment agreements
332 having a term of more than one year; or
333 (B) at least "A-1+" from S&P or "P-1" from Moody's for investment agreements
334 having a term of one year or less;
335 (iii) the investment agreement contains provisions approved by the public treasurer that
336 provide that, in the event of a rating downgrade of the provider or its affiliate guarantor, as
337 applicable, by either S&P or Moody's below the "A" category or its equivalent, or a rating
338 downgrade of a nonaffiliate guarantor by either S&P or Moody's below the "AA" category or
339 its equivalent, the provider must, within 30 days after receipt of notice of the downgrade:
340 (A) collateralize the investment agreement with direct obligations of, or obligations
341 guaranteed by, the United States of America having a market value at least equal to 105% of
342 the amount of the money invested, valued at least quarterly, and deposit the collateral with a
343 third-party custodian or trustee selected by the public treasurer; or
344 (B) terminate the agreement without penalty and repay all of the principal invested and
345 the interest accrued on the investment to the date of termination; and
346 (iv) the public treasurer receives an enforceability opinion from the legal counsel of the
347 investment agreement provider and, if there is a guarantee, an enforceability opinion from the
348 legal counsel of the guarantor with respect to the guarantee.
349 (3) (a) As used in this Subsection (3), "interest rate contract" means interest rate
350 exchange contracts, interest rate floor contracts, interest rate ceiling contracts, or other similar
351 contracts authorized by resolution of the governing board or issuing authority, as applicable.
352 (b) A public treasurer may, with the approval of the state treasurer:
353 (i) enter into interest rate contracts that the governing board or issuing authority
354 determines are necessary, convenient, or appropriate for the control or management of debt or
355 for the cost of servicing debt; and
356 (ii) use its public funds to satisfy its payment obligations under those contracts.
357 (c) Those contracts:
358 (i) shall comply with the requirements established by council rules; and
359 (ii) may contain payment, security, default, termination, remedy, and other terms and
360 conditions that the governing board or issuing authority considers appropriate.
361 (d) Neither interest rate contracts nor public funds used in connection with these
362 interest rate contracts may be considered a deposit or investment.
363 (4) A public treasurer shall ensure that all public funds invested in deposit instruments
364 are invested with qualified depositories within Utah, except:
365 (a) for deposits made in accordance with Section 53B-7-601 in a foreign depository
366 institution as defined in Section 7-1-103;
367 (b) reciprocal deposits, subject to rules made by the council under Subsection
368 51-7-18(2); [
369 (c) if national market rates on instruments of similar quality and term exceed those
370 offered by qualified depositories, investments in out-of-state deposit instruments may be made
371 only with institutions that meet quality criteria set forth by the rules of the council[
372 (d) specie legal tender held in a commercial specie repository that meets the quality
373 criteria set forth by the rules of the council.
374 Section 4. Section 51-7-18 is amended to read:
375 51-7-18. Duties of council.
376 (1) The council shall:
377 (a) advise the state treasurer and other public treasurers about investment policies;
378 (b) cooperate with the commissioner of financial institutions by promoting measures
379 and rules that will assist in strengthening the banking and credit structure of the state;
380 (c) at least annually, review the rules adopted under the authority of this chapter that
381 relate to the deposit and investment of public funds;
382 (d) at least annually, distribute the rules and amendments to rules adopted under the
383 authority of this chapter that relate to the deposit and investment of public funds to all public
384 treasurers; and
385 (e) provide, at least semiannually, a list of certified dealers that meet criteria
386 established by this chapter and council rules.
387 (2) The council may:
388 (a) recommend proposed changes in statutes governing the deposit and investment of
389 public funds to the Legislature;
390 (b) make rules governing:
391 (i) the financial reporting requirements of qualified depositories in which public funds
392 may be deposited;
393 (ii) the conditions and procedures for maintaining and revoking a financial institution's
394 designation as a qualified depository;
395 (iii) the definition of depository capital;
396 (iv) the conditions for maintaining deposits at a permitted depository;
397 (v) the conditions and procedures for maintaining and revoking a primary reporting
398 dealer's or a broker dealer's designation as a certified dealer;
399 (vi) certified investment advisers who deal with public treasurers, including
400 establishing standards and requirements for the use, qualification, and regulation of certified
401 investment advisers;
402 (vii) the conditions and procedures for maintaining and revoking a federal covered
403 adviser's or an investment adviser's designation as a certified investment adviser;
404 (viii) the conditions and procedures by which public treasurers may deposit and invest
405 public funds;
406 (ix) quality criteria for corporate obligations;
407 (x) the conditions and procedures by which public entities may use interest rate
408 contracts authorized by Subsection 51-7-17(3); [
409 (xi) quality criteria for a commercial specie repository, in consultation with the state
410 auditor; and
412 responsibilities under this chapter.
413 (3) The council may not make rules requiring a qualified depository to pledge or
414 deposit any of its assets in order to secure a deposit of public funds, except that public deposits
415 in excess of the maximum amount shall be collateralized as provided in Subsections
416 51-7-18.1(5)(b) and (6).
417 (4) Subject to legislative funding, the state treasurer shall supply qualified staff to the
419 (5) If any rule or act of the council would constitute an infringement upon the state
420 treasurer's constitutional duties and powers to have custody of and invest public money, the
421 conflicting rule or act is advisory and not mandatory.
422 Section 5. Section 63C-14-301 is amended to read:
423 63C-14-301. Commission duties.
424 (1) Until November 30, 2019, the commission shall:
425 (a) study and assess:
426 (i) the financial stability of the federal government;
427 (ii) the level of dependency that the state and local governments have on the receipt of
428 federal funds;
429 (iii) the risk that the state and local governments in the state will experience a reduction
430 in the amount or value of federal funds they receive, in both the near and distant future;
431 (iv) the likely and potential impact on the state and its citizens from a reduction in the
432 amount or value of federal funds received by the state and by local governments in the state, in
433 both the near and distant future; [
434 (v) the likely and potential national impact from a reduction in the amount or value of
435 federal funds paid to the states, in both the near and distant future; [
436 (vi) the taxpayer reporting requirements for specie legal tender income and the
437 remittance of taxes on specie legal tender income;
438 (vii) the collection of severance taxes in specie legal tender for taxes assessed under
439 Section 59-5-202 on gold and silver production; and
440 (viii) the issuance of bonds denominated and payable in specie legal tender for the
441 purpose of retiring existing government debt; and
442 (b) make recommendations to the governor and Legislature on methods to:
443 (i) avoid or minimize the risk of a reduction in the amount or value of federal funds by
444 the state and by local governments in the state;
445 (ii) reduce the dependency of the state and of local governments in the state on federal
446 funds; and
447 (iii) prepare for and respond to a reduction in the amount or value of federal funds by
448 the state and by local governments in the state.
449 (2) After November 30, 2019, the commission shall study, assess, and provide
450 recommendations on any federal issue that the governor, the Legislature through a joint
451 resolution of the Legislature, or the Legislative Management Committee directs the
452 commission to study, assess, and make recommendations on.
453 (3) On or before November 30 of each year, the commission shall report to the
454 Government Operations Interim Committee of the Legislature on the commission's findings
455 and recommendations.
Legislative Review Note
Office of Legislative Research and General Counsel